UK Tax Residency: the Shifting Sands

A landmark tax case involving UK tax residence is moving through all the stages of the UK legal system. The latest court decision against Mr Gaines-Cooper shows the increasing complexities facing anyone having to prove they are no longer Tax Resident in the UK.
Robert Gaines-Cooper has been fighting for years to prove that he became Non – UK Tax Resident when he moved to the Seychelles in the 1970s. The most recent case was a Judicial Review hearing in the Court of Appeal. Unless the onward appeal to the UK Supreme Court is successful, the CoA’s judgement effectively shifts the sands for individuals hoping to break their UK tax residence status.

The verdict significantly redefined the basis on which UK tax residence is decided. It ruled that the well-known ’90-day’ test, which used to appear in leaflet IR 20 (superseded by HMRC 6), has effectively been misunderstood, and only applies to determine whether an individual who had ceased to be UK-resident subsequently becomes UK-resident again. The CoA says that the law has not changed, but that IR20 failed to properly explain this issue in IR20. The judges say a crucial first hurdle has to be cleared by individuals. That is, to show that they have ‘left the UK’ – in the sense of having made a clean break.

How does this affect me?
The ruling only applies to those who had been UK Resident and claim to have left the UK permanently or indefinitely. It does not affect those who have taken up a full-time contract of employment overseas lasting a complete tax year, and whose visits to the UK are less than 90 days a year on average.
Those who want to be able to show they have left the UK permanently or indefinitely must have evidence that they have made a clean break from the UK.
People who left the UK several years ago and followed professional advice – on the basis of the rules set out in the old leaflet IR20 – can now only hope that they have broken UK tax residence. The latest interpretation is retrospective. Some wealthy individuals will have realised gains or received substantial income overseas since they “left” the UK. Those who had an explicit residency ruling from the taxman will probably be safe. Others may be at risk of HMRC starting a Tax Enquiry and making assessments under the “discovery” rules.

If you are confused or worried about your Tax Resident status then you may need specialist tax advice.Lynam Tax Residence Specialists have decades of experience in dealing with tax residence and domicile issues.
Call Paul Lynam today for an initial free, confidential, no obligation, discussion: 0845 643 9997